CAAD 94/2014-T: Deductibility of Autonomous Taxation Charges for IRC Taxable Profit

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 94/2014 – T

Subject Matter: CIT/Autonomous Taxes; Taxable Income; Deductible Expenses

I – REPORT

On 17 January 2014, the commercial company A, S.A., Tax ID No. …, with registered office … (hereinafter, the Claimant), filed a request for the constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime for Tax Arbitration, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as LRTA) – seeking the declaration of partial illegality of the self-assessment act for Corporate Income Tax (hereinafter, abbreviated as CIT) for the fiscal year 2010, to the extent corresponding to the non-deduction of fiscal charges with autonomous taxes in that same fiscal year, to which corresponds an amount of tax losses that were induly left unaccounted for in the sum of €277,587.66, due to a violation of law, with the consequent increase of the calculated tax losses from €21,546,717.81 to €21,824,305.47 –, with the Portuguese Tax Authority and Customs (hereinafter, the Respondent or PTA) being the Respondent. The Claimant submitted 16 (sixteen) documents and did not call any witnesses.

In essence and in very brief summary, the Claimant substantiated its request for arbitral pronouncement on the following legal argumentation: autonomous taxes are not CIT nor do they have anything to do with taxation under CIT; they constitute a taxation very distinct from CIT and which, unlike the latter, does not target income but rather certain expenses. Therefore, charges incurred with autonomous taxes are fiscally deductible, that is, they enter into the calculation of taxable income, together with other expenses or costs of activity, by virtue of the general rule for deductibility of fiscal charges provided in Article 23, No. 1, subparagraph f), of the CIT Code.

On the same day, 17 January, the request for constitution of the arbitral tribunal was accepted and automatically notified to the PTA.

The Claimant did not appoint an arbitrator, whereupon, pursuant to the provisions of subparagraph a) of No. 2 of Article 6 and subparagraph b) of No. 1 of Article 11 of the LRTA, the President of the CAAD Ethics Council designated the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable time period.

On 3 March 2014, the parties were notified of such designation and did not manifest any will to refuse the designation of the arbitrators, pursuant to the combined provisions of Article 11, No. 1, subparagraphs a) and b) of the LRTA and Articles 6 and 7 of the CAAD Code of Ethics.

Thus, in accordance with the provisions of subparagraph c) of No. 1 of Article 11 of the LRTA, the collective Arbitral Tribunal was constituted on 18 March 2014.

On 28 April 2014, the Respondent, duly notified for such purpose, submitted its Response in which, in addition to raising the exception of untimeliness of the request for arbitral pronouncement regarding the self-assessment act for CIT for fiscal year 2010, specifically contested the arguments raised by the Claimant and concluded for the rejection of the claim, with its consequent dismissal. The Respondent submitted no documents and did not call any witnesses.

In essence and also in very brief form, it should be noted that the Respondent based its defence, concerning the substantive matter in question in this case, on the understanding that autonomous taxes are not deductible for purposes of calculating taxable income, because, despite the particularities in their calculation, autonomous taxes remain CIT and, therefore, fall within the provision of subparagraph a) of No. 1 of Article 45 of the CIT Code in force at the time of the facts. According to the PTA, the correctness of such understanding is proven by the wording of the current subparagraph a) of No. 1 of Article 23-A of the CIT Code, introduced by Law No. 2/2014, of 16 January.

On 9 May 2014, the Claimant, duly notified for such purpose, made submissions regarding the exception raised by the Respondent in its Response, arguing for its rejection.

Subsequently, both parties, duly notified for such purpose, communicated that they waived the holding of the meeting referred to in Article 17 of the LRTA and requested that a time period be set for them to submit written arguments.

Sequentially, the Claimant and the Respondent submitted, in turn, their respective written arguments, in which they maintained the positions previously assumed and defended in their pleadings.

On … June 2014, duly notified for such purpose, the Respondent submitted the administrative process (hereinafter, AP) to the case file.

The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to Articles 2, No. 1, subparagraph a), 5, and 6, No. 1, of the LRTA.

The parties have legal standing and capacity, are legitimately involved and are legally represented, pursuant to Articles 4 and 10 of the LRTA and Article 1 of Order No. 112-A/2011 of 22 March.

The process is free from nullities.

Thus, there is no obstacle to consideration of the merits of the case.

Having examined all matters, it is appropriate to render

II. DECISION

A. FACTS

A.1. Facts Established as Proven

1. A, S.A., proceeded with self-assessment of CIT for fiscal year 2010, as well as with self-assessment of autonomous taxes provided for in Article 88 of the CIT Code (CITC), in a total final amount of €277,587.66, as stated in field 365 of Table 10 of the amended return, in the following terms:

   i. Autonomous tax on charges with vehicles, which generated the amount of €204,399.73 (€127,379.54 + €77,020.19);

   ii. Autonomous tax on per diem and compensation for travel in employee's own vehicle, in the amount of €7,097.84;

   iii. Autonomous tax on representation expenses, which generated the amount of €66,090.09.

2. Such autonomous taxes were paid in full by the Claimant.

3. The Claimant did not deduct, for purposes of calculating taxable income for fiscal year 2010, the charge incurred with the identified autonomous taxes.

4. Accordingly, it did not allow such charges as fiscal expenses in the calculation of taxable income for CIT purposes.

5. The Claimant submitted an amended return for the self-assessment referred to in item 1, on 12 February 2013.

6. Such return was subject to an administrative claim which was decided by a rejection order issued by the Chief of the Tax Management and Assistance Division, dated 30 October 2013, notified to the Claimant on 8 November 2013.

7. The request for constitution of the arbitral tribunal was submitted on 18.01.2014.

A.2. Facts Established as Not Proven

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Grounds for the Facts Established as Proven and Not Proven

Regarding the facts, the Tribunal is not required to pronounce on everything alleged by the parties; rather, it is its duty to select the facts that matter for the decision and to distinguish proven from unproven matters (see Article 123, No. 2, of the Code of Tax Procedure and Process and Article 607, No. 3 of the Civil Procedure Code, applicable by virtue of Article 29, No. 1, subparagraphs a) and e), of the LRTA).

Thus, the facts relevant to the judgment of the case are chosen and defined according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) in issue (see former Article 511, No. 1, of the Civil Procedure Code, corresponding to current Article 596, applicable by virtue of Article 29, No. 1, subparagraph e), of the LRTA).

Thus, considering the positions assumed by the parties, the documentary evidence and the AP submitted to the case file, the facts listed above were considered proven, with relevance to the decision, being moreover consensually recognized and accepted by the parties.

B. ON THE LAW

As a preliminary matter prior to consideration of the merits of the claim formulated by the Claimant, the PTA questions the timeliness of the request for arbitral pronouncement regarding the self-assessment act for CIT for fiscal year 2010.

Let us examine this.

The PTA thus questions, preliminarily to consideration of the merits of the claim formulated in this case, the timeliness of the request for arbitral pronouncement regarding the self-assessment act for CIT for fiscal year 2010.

The PTA understands that the Claimant identifies as the tax act object of the request for arbitral pronouncement the "act of self-assessment of CIT for fiscal year 2010, to the extent corresponding to the non-deduction of fiscal charges with autonomous taxes in that same fiscal year," and that, since "the deadline for payment of the tax in question in this case occurred on 31.05.2011/12.02.2013," the claim would be untimely.

Underlying the PTA's position is the understanding that the Claimant should have identified as the object of the arbitral pronouncement the act of rejection of the administrative claim submitted by it.

With all due respect, it is understood that the PTA is not correct on this matter. In fact, first and foremost, necessarily, the request for declaration of illegality of the act of (self-)assessment has underlying it, at least tacitly, the request for declaration of illegality of all subsequent acts whose validity is affected by such declaration, which obviously includes the act of rejection of the administrative claim.

Indeed, insofar as defects in the claim decision act itself or in the respective procedure are not raised, that act will be merely confirmatory and, as such, not subject to challenge in itself.

On the other hand, as has been recognized by national case law, if, in cases such as those at issue, the immediate object of the process is the act deciding the administrative claim, its mediate object will be the primary act of (self-)assessment itself.[1]

This situation is, moreover, perfectly clear in administrative litigation, the source of tax litigation, as results from Article 50/1 of the Administrative Procedure Code, duly combined with Article 59/4 of the same code.

The regime of tax arbitral litigation also corroborates this understanding, since Article 2 of the LRTA takes as the reference for the jurisdiction of arbitral tribunals the primary acts,[2] with secondary acts being relevant only as references to the timeliness of the claim being challenged, as results from Article 10/1/a) of that Regime, which requires that requests for constitution of an arbitral tribunal be submitted within ninety (90) days, counted from the facts provided for in Nos. 1 and 2 of Article 102 of the Code of Tax Procedure and Process.

That is, in summary and to be precise, the Claimant's claim was irreproachably formulated, since it relates to subparagraph a) of No. 1 of Article 2 of the LRTA (self-assessment act), and was submitted within the time period fixed by subparagraph a) of No. 1 of Article 10 of the same statute (ninety days counted from the decision on the administrative claim, the act referred to in No. 2 of Article 102 of the Code of Tax Procedure and Process).

Accordingly, the exception of untimeliness of the claim raised by the PTA must be rejected.

Having arrived at this point, it becomes possible to address the substantive matter submitted to this Arbitral Tribunal.

The crux of the matter at issue in this case resides in Article 45/1/a) of the CITC, in the wording in force at the time of the tax event, which stated:

"The following charges are not deductible for purposes of determining taxable income, even when recorded as expenses for the taxation period:

a) CIT and any other taxes that directly or indirectly affect profits."

Essentially, it is a question of determining in this case whether the sums incurred by the Claimant with autonomous taxes, assessed and paid in accordance with the CITC, are or are not excluded from the determination of taxable income, as assessed under the same Code.

When speaking of autonomous taxes, as is the case, it is convenient to note from the outset that we are dealing with a disparate set of situations that will comprise, at minimum, three distinct types, namely:

• Autonomous taxation of certain income (e.g., Nos. 3, 5 and 6 of the Personal Income Tax Code);

• Autonomous taxation of certain deductible expenses (e.g., Nos. 3 and 4 of Article 88 of the CITC);

• Autonomous taxation of other expenses regardless of their respective deductibility (e.g., Articles 1 and 2 of Article 88 of the CITC).

At issue in this case is the second of the enumerated types of autonomous taxation, as expressly results from item 1 of the proven facts and Article 176 of the initial request itself.

This precision becomes important because, contrary to what the Claimant argues, it is understood that given the disparity and heterogeneity of the situations subject to autonomous taxes, it would be not only unnecessary but even counterproductive, in this context, to attempt to synthesize and seek a proper and unitary legal nature common to all such situations.

Thus, the discussion should be centered on the concrete autonomous taxes incurred by the Claimant and an attempt made to provide a properly grounded response to the restricted terms of what is at issue in this case, which will be, then, whether the sums paid within the framework of autonomous taxes on deductible expenses by a person subject to CIT should be considered a deductible charge for purposes of calculating taxable income subject to that tax.

Properly framed in these terms, the issue to be resolved in this case, it should be borne in mind that the fundamental reference for the response to be given to it will be that formulated in Article 9 of the Civil Code, according to which the legislative intent should be reconstructed from the texts, such intent having in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

In this context, the aim of the present decision will be, not to theorize about the legal nature of autonomous taxes in general or of any of its various types, but rather to determine whether the legislative intent, with a minimum of verbal correspondence in the letter of the law, even if imperfectly expressed, was, at the time of the tax event at issue in this case, to the effect that the sums paid within the framework of autonomous taxes on deductible expenses by a person subject to CIT should be considered a deductible charge for purposes of calculating taxable income subject to that tax.

Taking the Claimant's words as a starting point and assuming that deductibility or non-deductibility of the amounts incurred with the autonomous taxes at issue in this case is, to the utmost, but effectively, "a purely legislative policy choice," it will be a matter of verifying what was, in the legal framework in force at the time of the tax events sub judice, the sense of such choice.

It is thus, and from now on, accepted that the methodological path followed here is, substantially, distinct from that underlying the Claimant's argumentation.

Indeed, that argumentation denotes a markedly conceptualist basis, resting on a dogmatic definition of monolithic concepts of CIT and Autonomous Taxes, drawn, in large part, from normativity foreign to the matter to be decided, close to the "scholastic ontologism" that "considered it possible to deduce purely logically, from abstract superior concepts, others, increasingly more concrete and full of content,"[3] evidenced in the recurrent insistence on the definition of CIT resulting from Articles 1 and 3 of the CITC and, above all, in a unitary concept of Autonomous Taxes, aggregating legal realities of disparate nature and teleology.

Here, by contrast, the sole aim is to ascertain what solution, faced with constituted law, properly interpreted, appears appropriate to the concrete case, not taking the answer given to the matter to be decided as a finished, exact fact with an extreme degree of rigor and precision, but merely as that which, reflectively, presented itself to its undersigned authors as the legally better one.[4]

In assessing the matter at issue in this case, it should be borne in mind from the outset that the norm of Article 45 of the CITC is situated in a context of broad legislative discretion. That is, in defining what expenses are deductible or non-deductible for tax purposes, the tax legislator enjoys broad discretionary power.

The Claimant itself recognizes this fact, at page 19 of its arguments, referring to the fact that "the legislator, if not as a matter of law, then certainly as a matter of fact, has had (with the blessing of the Constitutional Court), and has exercised, broad discretion in matters of (non-)deductibility of costs for tax purposes."

Accordingly, one cannot say that the legislator is prohibited, by the "nature" of autonomous taxes (and, in particular, of that which is peculiar to autonomous taxes arising from deductible expenses under CIT), whatever it may be, from excluding them from deductible charges for purposes of the tax in question.

It is thus considered that it will be legitimate for the legislator to include or exclude autonomous taxes that concern us from that category of deductible charges for purposes of CIT, regardless of the "nature" that legal doctrine or case law may ascribe to them.

Thus, continuing with the Claimant's words, "the question here is solely whether, until 31.12.2013 or, more specifically, whether in the fiscal year 2010 at issue here, by virtue of the understanding that ATs are CIT, one should conclude that the legislator had already exercised the discretion to include charges with autonomous taxes among those that are non-deductible for CIT purposes."

Being so, it becomes clear from the start that the conceptual value of what, from a generic or doctrinal point of view, is CIT, or what is Autonomous Taxation (if a unitary concept of this is even possible), will be of little utility in the interpretative path to be followed, since, by nature, no deductibility/non-deductibility of the corresponding charges will flow from them.[5]

Another factor to be borne in mind, not refuted by the Claimant, is that no principle prevents the legislator from isolating certain types of income and subjecting them to specific, or differentiated, rates, as occurs, for example, in the cases provided for in the various subparagraphs of No. 4 of current Article 87 of the CITC.

Equally, there will be no principle preventing the tax in question from being due, assessed and paid, not on the basis of a period (more or less long) of taxation, but by virtue of the occurrence of instantaneous facts, as occurs already, for example, in cases of withholding at source with final character (see Article 94/3 of the CITC).

This circumstance, equally omitted from the Claimant's argumentation, shows that the nature – instantaneous or continuing – of the tax-generating fact will not be decisive for any conclusion that may be drawn on the matter.

Finally, not even the result, apparently so counterintuitive and striking, of the possibility of tax being due by way of autonomous taxes that now concern us, even in the absence of a (positive) taxable income at the end of the taxation period, is unprecedented in the CIT regime.

Thus, and in some of the already mentioned cases of withholding at source with final character, the situation can arise where the person entitled to the income subject to such withholding has had expenses exceeding income, being, nevertheless, taxed by virtue of such withholding.

Also, in the case of the operability of some of the specific anti-abuse clauses (Articles 63 to 67 of the CITC), by virtue of the disallowance of costs, it may occur that persons subject to taxation are taxed on a fictitious taxable income, to the extent that there may be in question the disallowance of costs actually incurred but considered abusive. It may thus occur that a person subject to taxation has to pay CIT, despite in reality having had losses.

The Claimant refers to this that these will be situations distinct from Autonomous Taxes the object of consideration in the present case, since they will be rules that "form part of the set dealing with the measurement of taxable income to be subject to CIT rates."

The Claimant approaches on this point the understanding here proposed, which considers that the Autonomous Taxes sub judice will form part of the normative set dealing with the definition and quantification of tax obligations of CIT subjects, as such tax.

Indeed, the above reference to situations of withholding at source with final character and to anti-abuse norms do not have underlying them an equation between them and the Autonomous Taxes sub judice, nor even between themselves.

Rather, they are mere reflective points on the question of imposition of a tax obligation in situations of absence of income (profit), facilitating the understanding of the analogical process of "bringing the life situation closer to the norm" and "on the other hand, bringing the norm to the life situation."[6]

And that which the Claimant points to as explanation of those focal points of analogy, the "fact that they may be poorly calibrated or designed (absence of safety valves)," can also be directly transposed to the domain of the Autonomous Taxes that concern us, saying that the aspect in evidence – that is, the circumstance that there can flow from them an imposition of tax obligation even in the case of absence of income (profit) – may be due to poor calibration or design.

By this means it will then be shown that the circumstance that the Autonomous Taxes which are the object of this case can impose a tax obligation, even in situations of tax loss, despite being prima facie striking, should not, in itself, be decisive in the argumentation underlying the final decision to be made on the matter.

Returning to the situation concretely at issue in this case, the Claimant begins by arguing the understanding according to which autonomous taxes relating to expenses with deductible charges under CIT affect expense, and not income.

Recognizing the matter at issue as unquestionably complex, resulting from a succession of legislative changes in a context of economic deterioration, it is understood that not only are things necessarily as the Claimant contends, but indeed that framing is not the most adequate to the legal data.

In assessing the question at issue, it should be borne in mind from the outset the case law formed over recent years regarding the constitutionality of the norm of Article 5, No. 1, of Law No. 64/2008, of 5 December, to the extent that it retroactively applied as of 1 January 2008 the amendment of Article 81, No. 3, subparagraph a), of the Corporate Income Tax Code, enshrined in Article 1-A of the mentioned statute, and which culminated in the respective declaration of unconstitutionality.

This case law, as is well known, did not directly address the legal-tax nature of the autonomous taxes in question, but focused specifically on the question of determining the nature of the respective tax-triggering fact, that is, it sought to ascertain what was the concrete fact from which the birth of the legal-tax obligation to pay the tax arose, concluding that such fact was the realization of certain expenses relating to charges identified in law – a fact of instantaneous nature – and that, as such, the application of the tax to facts prior to the law's entry into force would be contrary to the Constitution. This case law does not thus extend to the question of the "nature" of autonomous taxes in CIT, but solely to determining the nature of the tax fact (instantaneous or continuing) that underlies them.

This does not, however, mean that the case law in question cannot provide insights into the understanding that was somehow underlying the current line of case law, on the matter that now concerns us. One must not fail to bear in mind that, as stated, it was not that question which constituted the direct object of the courts' consideration, and that any claim in such field should obtain support in the argumentative text itself of the decisions, taking into account their respective context, and not in the immediate decision-conclusive segment.

Now, viewed in this light, one will conclude, if not in the opposite sense to that conveyed by the Claimant, at least to the effect that one should not consider as necessarily underlying the case law in question the understanding sustained by that party.

Indeed, first and foremost, Constitutional Court Judgment No. 617/2012, of 19 December 2012,[7] appears to adhere to the position of Prof. Saldanha Sanches on the matter, cited therein, according to which:

"With this provision, the system demonstrates its dual nature, with a higher rate of autonomous taxation for certain special situations that one seeks to discourage, such as the acquisition of vehicles for business purposes or vehicles that are arguably overly expensive when losses exist. A sort of presumption is created here that these costs do not have a business purpose, and therefore are subject to autonomous taxation. In summary, the cost is deductible, but autonomous taxation reduces its tax advantage, since here the basis of taxation is not net income, but rather a cost transformed – exceptionally – into an object of taxation."

Even in the same Judgment can be read also that "As for autonomous taxation in CIT, the tax-generating fact is the very realization of the expense" (emphasis added), thus demonstrating to have underlying the idea, not contradicted (at least expressly) by the Claimant, that notwithstanding the tax-generating fact being the realization of the expense, taxation still occurs within the scope of CIT!

Continuing, the Judgment in question states that:

"For this reason, Sérgio Vasques (see Manual of Tax Law, Almedina, 2011, page 293, footnote 470) calls attention to the circumstance that taxes on income contemplate elements of single obligation, such as the liberatory rates of Personal Income Tax or the autonomous taxation rates of CIT."

Also in the dissenting opinion of the same Judgment it was written that:

"We are not here, strictly speaking, before a single-obligation tax but before tax facts that, while affecting deductible expenses, are inseparably linked to the calculation and assessment of CIT" (emphasis added).

Moreover, already in Judgment 18-2011 of the Constitutional Court, one could read, in the dissenting opinion precursor of the subsequent reversal of case law, that:

"Although formally inserted in the CITC and the amount that it allows to collect is assessed within its scope and as CIT, the norm in question respects a tax imposition that is materially distinct from taxation under this tax" (emphasis added).

That is, and regardless of what is considered to be the underlying understanding regarding the nature of autonomous taxes on deductible expenses under CIT, it is concluded that in constitutional case law on the matter, it was never at issue that the amount collected by way of those autonomous taxes was so at the title of CIT, from which it is concluded that such case law does not, from the start, establish that charges incurred with such taxes should be considered deductible costs for purposes of said tax.

It is true that, still in the cited Judgment 617/2012 of the Constitutional Court, it is stated that:

"In truth, although the taxation of certain charges is formally inserted in the Corporate Income Tax Code and the respective amount is assessed within the scope of that tax, such taxation is a tax imposition materially distinct from taxation under CIT."

However, and with all due respect, it will not be here that the Constitutional Court is taking a position on the legal nature of the autonomous taxes now at issue, understanding them as a tax distinct from CIT.

Indeed, first of all, the Constitutional Court, it is thought deliberately, does not use the expression "tax," in expressing the distinction it makes, speaking instead of "tax imposition" and "taxation."

On the other hand, contextually understood, taking into account not only the passages already highlighted above, in particular the quotation from Sérgio Vasques, as well as the framework and purpose with which the distinction in question is made, one should conclude that the statement now commented upon relates to the manner of imposition of the tax obligation to pay the amounts taxed under autonomous taxation, as being materially distinct from the ordinary manner of imposing the tax obligation to pay CIT.

The Claimant also anchors its argumentation in case law of the Superior Administrative Court regarding other matters than the one immediately addressed above, namely:

• the question regarding the scope of application of Article 12 of the CITC, prior to the amendment made by Law No. 109-B/2001, of 27 December;

• the question regarding the applicability of the norms relating to autonomous taxes affecting confidential expenses, to an entity subject to gaming tax.

First and foremost, with respect to this matter, it should be said that it is understood that no opposition exists between the decision criticized by the Claimant (or, for that matter, the present decision), and the case law invoked by it.

Indeed, first of all, the legal questions decided are – patently – distinct, and at most there may be some incompatibility between their respective theoretical grounds.

Indeed, contrary to what the Claimant alleges, the questions that arise in the three judgments compared are not that of "ascertaining whether a certain norm applicable to CIT would also be applicable to autonomous taxation on expenses." This is, rather, the question that, conceptually, the Claimant abstracts from the judgments it analyzes. Indeed, the question that is decided in the Superior Administrative Court judgments glossed by the Claimant are those indicated above, and the one decided in the arbitral judgment is that of ascertaining whether in 2010 "the legislator had already exercised the discretion to include charges with autonomous taxes among those that are non-deductible for CIT purposes."[8]

Thus, and turning now, with propriety, to the case law of the Superior Administrative Court,[9] there will only be a contradiction between decisions when there is "opposition between express solutions and such opposition should exist regarding the decisions themselves and not in relation to their grounds [not even sufficing mere implicit pronouncement or mere collateral consideration, made within the framework of examination of a distinct matter."

One does not deny, evidently, that some considerations made here and there, within the framework of the already alluded process of "bringing the life situation closer to the norm" and "on the other hand, bringing the norm to the life situation," are incompatible. But what is decided in some decisions and others is not, precisely because the "life situation" examined is not the same.

Moreover, and even if in the judgment of decision contradictoriness the considerations highlighted by the Claimant should interfere, it is still understood that the same, properly understood, do not contain any insuperable contradiction if we detach ourselves from a militant and vigorous aprioristic conceptualism and embrace a systematic understanding of applicable law in its entirety, understanding thus that the complexity generated by successive changes in the architecture of the CITC led, as below will be referred to again, to an atypical normative building, in which one can discern a core corresponding to what might be called CIT proper (or in the strict sense), which the Claimant seeks to make exhaust everything that is designated CIT, and a periphery that integrates "marginal" regulations, substantially withdrawn from the logic, nature and principles of CIT proper, but which, notwithstanding, still lie in the "gravitational field" of that.

And it is in the process of defining this difficult-to-define zone that all the decisions analyzed by the Claimant operate, and the same cannot be properly understood without also understanding that, in fact, what all the decisions in question are doing is determining what consequences the "gravitation" around the core of CIT brings to the matters addressed in each of them.

Viewed in this manner, one cannot fail to find a certain line of coherence among the decisions in question, which stems, among other things, from the circumstance that entities covered by both Article 7 and Article 12 of the CITC are persons subject to CIT, so the legal regime of CIT – CIT in the broad sense – will apply to them, without prejudice to a substantial part, corresponding to CIT in the strict sense, being disregarded by virtue of the specialty of the regimes to which they are subject (fiscal transparency/gaming tax).

Thus, first and foremost, note that, regarding the decision in case 0830/11 of the Superior Administrative Court, it was concluded, precisely, in the sense in which the legislator came to dispose. That is, the Superior Administrative Court considered that the non-subjection to CIT of entities subject to the fiscal transparency regime did not encompass autonomous taxes, precisely what was subsequently established in law, within the logic of autonomous taxes still integrating the CIT regime.

Now, such will only be logically comprehensible within the hermeneutic framework outlined above, that is, that, by virtue of the historical evolution of its legal regime, there constituted a type of CIT that integrates a hard core – in which the Superior Administrative Court judge considered, and rightly so, that autonomous taxes do not integrate – and a group of adjacent norms, which shares part of the logic and regime of that, but in many respects diverges from them.

Similarly, and already as regards the matter of case 077/12, and with the particularity, which cannot fail to be underlined, that autonomous taxes on confidential expenses were at issue – which the Claimant itself recognizes as materially distinct from what now concerns us[10] – one will be able to understand what was decided there in light of the above-referred understanding, that is, that what the Court in fact did was define that the non-applicability of the CIT regime to activities subject to special gaming tax is limited to CIT proper, excluding autonomous taxes on confidential expenses, perhaps having underlying the understanding that the gaming tax will integrate, in some way, a special regime of income taxation (similar, for example, to the former property contribution), which does not prejudice the application of the general CIT regime to that extent to which it is not incompatible with such special taxation.

Accepting, then, as materially distinct, in the sense determined by the Constitutional Court, as to the manner of tax imposition, taxation under autonomous taxes that now concern us, from that occurring under CIT proper (one through an instantaneous fact and the other through a continuing fact), it is understood nonetheless that such autonomous taxes, affecting deductible expenses, still occur within the scope of and as title of CIT, just as, for example, autonomous taxes under Personal Income Tax (and liberatory rates themselves which, with all due respect, integrate themselves also a sort of autonomous taxation[11]), despite potentially being based on instantaneous facts, are assessed and paid as title of Personal Income Tax, integrating the regime of such tax.

It is thus understood, in summary, that one thing is the type of tax fact that underlies a certain imposition. Another thing is the title under which such imposition is due, in the end, the cause[12] of the tax obligation. And in the case of autonomous taxes under CIT, that cause, the title under which the tax is required, will still be CIT.

In this sense, it must be noted, above all, that the legal regime of autonomous taxes in question in this case only makes sense in the context of taxation under CIT. That is, disconnected from the legal regime of this tax, they will lack their principal reference for meaning. Their existence, their purpose, their explanation, in the end, their juridicity, is only properly comprehensible and acceptable within the legal regime of CIT.

Indeed, autonomous taxes now under analysis, systematically belong to CIT, and not to VAT, to corporate income tax, or to any new tax. That is, although one may accept that the tax-generating fact will be each of the individually legally typified charges, the fact is that these are not, qua tale, the final object of the taxation, the reality that one seeks to burden with the tax. If this were the case, and once more this aspect is forgotten in the Claimant's argumentation, all expenses made by all subjects would obviously be taxed, and not just by some of them.[13]

That is, autonomous taxes of the kind now concerning us are strongly linked to the subjects of the income tax in question, and, more specifically, to the economic activity carried out by them.

This aspect becomes even more evident if one notes another fundamental fact present from the beginning: the circumstance that the autonomous taxes now at issue only affect, at the time of this dispute, deductible expenses!

This circumstance, also overlooked by the Claimant, it is believed, is elucidative of the intertwining existing between those and CIT (in this case), and justifies not only their inclusion in the CITC, but equally their integration, as of right, as part of the legal regime of CIT.[14]

Indeed, not only:

• only expenses incurred by persons subject to CIT are subject to the imposition of autonomous taxation in such framework;

• but such expenses will be so only if such subjects elect them as deductible expenses in the calculation of the taxable matter of such tax.

The picture thus drawn is, it is considered, substantially distinct from what a tax affecting certain expenses, objectively considered, would be, appearing that the quality and choice of the person subject to taxation have here a relevance, if not greater, at least equal to the charge that triggers the tax imposition.

Moreover, it can always be said that if the person subject to CIT opts for not deducting from taxable income for purposes of such tax the charges corresponding to expenses subject to autonomous taxation, such person will not have to bear this tax, which will be demonstrative[15] of what was noted above, that is, that the cause of autonomous taxes will still and ultimately rest on the CIT regime.

In this context, and returning to the question to be decided formulated ab initio, as being to determine what the legislator's intent was, expressed in the legislative text, understood in its entirety, the combination of the tenor of Article 12 of the CITC with Article 45/1/a) of the same will leave little doubt as to the legislative understanding that autonomous taxes, if they do not constitute CIT strictly so called, will surely integrate the regime of such tax, and will be due at such title.

It is thus considered that the legislative intent, with a minimum of verbal correspondence in the letter of the law, even if imperfectly expressed, was, at the time of the tax event at issue in this case, to the effect that the sums paid within the framework of autonomous taxes on deductible expenses by a person subject to CIT should not be considered a deductible charge for purposes of calculating taxable income subject to that tax.

The correspondence of such intent in the legislative text is quite apparent in the tenor of Article 12 of the CITC, in force already at the time of the tax event, which states:

"Entities and other entities to which, in accordance with Article 6, the fiscal transparency regime applies are not taxed under CIT, except as to autonomous taxes." (emphasis added).

That is, from the perspective of the legal system, reflected in its respective text, autonomous taxes integrate the regime of, and are due at title of, CIT, which is why in the norm just transcribed the legislator expressly reserved its application. Therefore, in parallel, if it were the legislator's intent to exclude autonomous taxes from the scope of subparagraph a) of No. 1 of Article 45 of the CITC, it would have said so expressly, since it would not make sense (would not be reasonable) for in one norm of the Code (Article 12) the legislator to understand that taxation under CIT encompasses autonomous taxes and in another (Article 45) to understand the opposite.

And it should not be said, as the Claimant does, that such norm can only be understood as that, at most, such norm will be worth "for purposes of the assimilation of autonomous taxes to CIT exclusively for purposes of the normative provision that contains it,"[16] which would lead, from the start, to the question of knowing whether that is the maximum sense capable of being drawn from the norm in question, what would be the minimum...

Notwithstanding, the very terms in which the Claimant frames the question denotes its misunderstanding as to what has been being said. That is, nowhere is an "assimilation of autonomous taxes to CIT" being effected, being said instead that the wording of the norm in question, in force at the time of the tax events sub judice, has underlying it (or forms part of the evolutionary process of the construction of CIT in the terms already addressed above (in the strict sense and in the broad sense), just as will be the case in the norm that concerns us here (Article 45/1/a) of the CITC then in force), and, for that matter, in Article 7 of the CITC, properly interpreted and understood.

On the other hand, and reinforcing what has just been stated, Article 3 of recent Law 2/2014 of 16 January, added Article 23-A to the CITC, which succeeds the former Article 45 and to which, by what has been said, should be given, on the matter concerning us, an interpretive character, came to provide that:

"1 — The following charges are not deductible for purposes of determining taxable income, even when recorded as expenses for the taxation period:

a) CIT, including autonomous taxes, and any other taxes that directly or indirectly affect profits;" (emphasis added).

That is, and in summary, from the consideration of the legislative text, statically and in its historical evolution, it results that the legislator understood, and continues to understand, that autonomous taxes integrate CIT, if not as a tax stricto sensu, at least in terms of forming part of the same unitary tax regime, and should receive the same treatment with respect to deductibility for purposes of calculating taxable income.

What has just been stated will not be obstructed by the provision of Article 1 of the CITC, which states that the tax in question "affects income obtained (...) in the taxation period."[17]

Indeed, first of all, the norm in question is a programmatic or ordering norm, proclaiming a general (normal) sense or intentionality of the tax in question, but not having underlying it any intention strictly typifying or delimiting its operability.

On the other hand, such norm predates the emergence of the current regime of autonomous taxes in CIT, so no decisive conclusion should be drawn from the maintenance of its tenor in light of that phenomenon, except, perhaps, the lack of consideration by the legislator of the overall system when proceeding with punctual amendments thereto.

Indeed, the tax legislator has, in the recent past, changed the tax treatment relating to autonomous taxes, without ever having altered the perspective of including them in income taxation. Notably, the introduction in a first phase of non-deductibility of per diem and charges for compensation for travel in employee's own vehicle in cases developed in such provision, to quickly transform non-deductibility into generalized deductibility of such charges replacing it with (yet another) autonomous taxation. Another zigzag in the tax treatment in this regard relates to the replacement of partial non-subjection (only on the depreciation portion) with autonomous taxation when there is a written agreement with the employee or statutory body regarding the use of motor vehicles with respect to which the agreement provided for in subparagraph b) of No. 3 of Article 2 of the Personal Income Tax Code has been concluded, to, following the recent CIT Reform, such replacement becoming total, that is, if such written agreement exists, there will be no autonomous taxation on any charges relating to such vehicles. And before this amendment, there had been another (curiously only reflected in the CIT Code, and not in the Personal Income Tax Code, regarding autonomous taxation of motor vehicles relating to some charges in category B) in the sense of extending autonomous taxation under CIT to all charges made or incurred (emphasis added) and not only deductible ones, as was the case at the time of the occurrence we are dealing with.

In any event, it appears that there will not even be a case for, in particular, ratifying that conclusion, to the extent that, as has been stated, from the perspective of the legislator, autonomous taxes in question in this case will effectively and unequivocally integrate the regime of CIT, being due at title of such tax.

This does not mean what has just been stated, that, as the Claimant suggests, it is understood that "the definition of CIT contained in Articles 1 and 3 of the CITC" is "really surpassed by a new definition of cross-cutting/general application," such being an epistemological posture proper to a conceptualism that, from the outset, is repudiated.

On the contrary: it is the recognition of that which, faced with the legal framework in force, imposes itself as the most reasonable: the definitive abandonment of any definition of cross-cutting/general application of CIT, and the recognition of the regime thereof as a complex and multifaceted reality, irreducible to a definition of that kind, which only a fundamentally abstractionist conceptualism could presuppose.

All of which has been being said evidences that the evolution of the legal regime of CIT transmuted it into a complex and multifaceted reality, at the most diverse levels, which is reflected, in the matter that concerns us in this case, in that "dual nature" spoken of by Prof. Saldanha Sanches in the passage cited in Judgment 617/2012 of the Constitutional Court.

The recognition of this duality of nature does not, however, prejudice, as it is understood to underlie both the citation in question and the case law that cites it, that one considers that the system, despite being dual, is the same.[18] Put differently, it only makes sense to speak of a dual-nature system, if the system in question, globally considered, remains the same. Otherwise one would speak not of a system of dual nature, but of two distinct systems, which, from all that has been being said, is not what occurs. And, in this case, the system will be the regime of CIT, which operating sometimes by profit, sometimes by expenses, aims at and pursues the purposes proper to such tax, including, evidently, the collection of revenue for the State.

In this respect, it is understood that, in the current context, notwithstanding the undeniable finding that autonomous taxes have been weighing significantly in the tax revenues of CIT, one cannot conclude that those in question in this case are essentially a revenue-collection tax (an "essentially revenue-gathering" purpose), disproportionate and disconnected from taxpaying capacity. Indeed, in a context where Personal Income Tax rates reach values significantly beyond 50%, for still-middle-class income levels, autonomous taxes will surely not integrate the "eye of the hurricane" of such problematic.

Notwithstanding the said modus operandi by way of expense, typical of autonomous taxes under analysis, it will still be susceptible of being materially connected with the income that ultimately legitimizes CIT.

Indeed, and as was evidenced above, the said taxes intervene especially (at the time of this case, integrally) in autonomous taxes in question, in that the person subject to taxation opts for deducting the expenses on which they fall to their gains for purposes of CIT. This circumstance will be explained materially by the existence of current profits that the person subject to taxation seeks to see diminished, or by an expectation of future profits, which will equally be diminished by virtue of the accounting of the charge corresponding to the expense subject to autonomous taxation.

Put differently: a taxpayer who has neither nor expects to have taxable profit under CIT will not be affected by autonomous taxes in question in this case[19] since such person may simply not deduct from gains the expenses that trigger them. In such situation, the taxpayer in question will have a lesser tax loss – which will be irrelevant to such person, since the dimension thereof will only be significant if, and when, the question of its deduction against taxable profit arises – but will not be subject to autonomous taxation.

In one manner or another, one will always ultimately be bearing in mind an income, present or future, that the legislator tolerates being taxed less (by virtue of consideration of the deducted expense), in exchange for an immediate taxation when the expense is incurred, thus aiming, in this perspective, at autonomous taxes to which we refer, even if indirectly, at the income of the person subject to taxation.

Such taxes will be, from this point of view, a (convoluted, to be sure) way of, indirectly and through the expense, still taxing the (actual or potential/future) income of corporate persons.

And it is for this reason that the option is granted to the person subject to taxation of accounting as a deductible charge the amount of the charge subject to autonomous taxation, bearing it, or not deducting it, being taxed on the income resulting therefrom, under "normal" terms.

This aspect, which conditions the occurrence of the type of autonomous taxation at issue in this case to an option of the person subject to CIT, evidences further that it is not aimed at, at least directly or in first line, the income of the natural person putatively benefiting from the expenses or charges, since if it were, the autonomous taxation in question should operate, regardless of its eligibility as a deductible charge by the person subject to CIT, as indeed happens with other types of autonomous taxation.

Autonomous taxes in question in this case will also, from another point of view, integrate the list of specific anti-abuse norms,[20] and a similarity is evident with, for example, the norm of current Article 65/1 of the CITC, which provides:

"Charges are not deductible for purposes of determining taxable income in amounts paid or owing, for any reason, to natural or corporate persons residing outside Portuguese territory and subject there to a clearly more favorable tax regime, unless the person subject to taxation can prove that such charges correspond to actually realized transactions and do not have an abnormal character or an exaggerated amount."

That is, in the cases to which the autonomous taxes incurred by the Claimant in this case relate, the legislator could have opted for a regime similar to that provided for in the transcribed norm, simply prohibiting their deductibility, or conditioning it on the same terms as the norm above, or others it deemed appropriate. Instead, it opted for not going so far, remaining the legal regime of CIT regarding expenses in question at a level below, by permitting the deductibility of the charges in question, against the immediate payment of a portion of the taxable income that, present or in the future, will be affected by such deduction.

Notwithstanding, the similarity of the regimes will still be undeniable, as well as the concerns and purposes underlying them.

What has just been stated has, in this manner, underlying it the finding that autonomous taxes, including those in question in this case, owe much of their reason for being to the circumstance that it will be, objectively, unviable to fully tax on a rigorous basis under Personal Income Tax in the direct beneficiaries themselves of the expenses subject thereto (which would be equivalent to taxation of fringe benefits as was conceived and applied in Australia and New Zealand). One is not thus ignoring, once more in opposition to what is stated by the Claimant,[21] that autonomous taxes of the type that here concerns us have an aspect directed directly at the income of natural persons. They do, for that matter, have a punitive aspect – in the sense of imposing unfavorable treatment – regarding the type of expenses that trigger them. However, these aspects do not empty, nor much less make impossible, another aspect, equally (if not more) relevant, inseparably interlinked with the income of corporate persons.

It is thus understood that, by way of the impositions in question, it is also sought to regulate, at least to the same extent, the use by enterprises of expenses that may be necessary, in part, to the pursuit of normal activity, but which – based on a judgment of normality – will also be for the benefit of natural persons who end up enjoying them in a personal and non-professional capacity. Only that, the Tax Administration having no "measuring rod" to make such separation, the legislator has been opting, for quite some time now, for the introduction in the CIT Code of this portion that already considered, objectively, at the time of this case (Article 12 of the CITC will be sufficiently enlightening on the legislator's spirit, as has been noted previously), an imposition, at minimum, similar to CIT, even if such provision can be questioned (as well as the current wording, regarding inclusion in CIT of autonomous taxes in Article 23-A of the CIT Code).

Recognized here, thus, are those characteristics that legal doctrine has for some years been pointing out for autonomous taxes in question, such as:

a) autonomous taxation only makes sense because costs/expenses are relevant as negative components of taxable income for CIT purposes. This is what motivates persons subject to CIT to report as high a value as possible of such expenses to diminish the taxable matter of CIT, collection, and consequently the tax to be paid;

b) it is intended to discourage such types of expenses in persons subject to taxation presenting negative results but which, regardless thereof, continue to evidence consumption structures little or not at all compatible with the financial health of their enterprises;

c) it is, in more general thesis, a matter of modeling the tax system in such manner that it reveals a certain balance having in view a better distribution of the effective tax burden among taxpayers and types of income;

d) certain expenses are considered unfavorably in that, recognizably, it is not easy to determine the exact measure of the component corresponding to private consumption, and regarding which the general practice of abuse in their reporting is known.

Better or worse, autonomous taxes now in question should thus be understood as a form of preventing certain actions deemed abusive, which the "normal" functioning of the taxation system was incapable of preventing, and other forms of combating such actions, including forms more onerous for the taxpayer, were possible.

This anti-abuse character of autonomous taxes now in question will be not only coherent with their "anti-systemic" nature (as occurs with all norms of the kind), as with a presumptive nature, pointed out both by Prof. Saldanha Sanches and by the case law that cites him.

From this angle,[22] the autonomous taxes under analysis will thus have materially underlying them a presumption of "partial" business purpose of the expenses on which they fall, based on the above-noted circumstance that such expenses lie in a gray line separating what is business expense, productive, from what is private expense, of consumption, and that, notably, in many cases, the expense will effectively in reality have a dual nature (part business, part personal).[23]

Confronted with this difficulty, the legislator, instead of simply disallowing their deductibility, or reversing the burden of proof of the business purpose of the expenses in question (requiring, for example, proof that they "do not have an abnormal character or an exaggerated amount," as it does in Articles 65/1 and 88/8 of the CITC[24]), opted for enshrining the regime currently in force, which, notwithstanding, has precisely the same foundation, the same purpose, and the same type of result as other forms used in other typical situations of the regime (in this case) of CIT.

This presumption of "partial business purpose" should, in coherence and contrary to what the Claimant states, be considered as encompassed by the possibility of elisión generically enshrined in Article 73 of the General Tax Law, whether by the taxpayer or by the Tax Administration, which appears, for that matter, to be in accordance with a proportional and adequate distribution of the burden of proof, in that insofar as autonomous taxes in question affect expenses of business purpose not evident from the start, it will be the taxpayer who will be better positioned to demonstrate that such requirement is verified in the concrete case.

For its part, the Tax Administration itself, should it deem it appropriate and consider that the case justifies the inherent expenditure of resources, may always demonstrate that, regarding the expenses in question, and even though autonomous taxation has fallen thereon, the general requirement of Article 23/1 of the CITC does not obtain, in particular its indispensability for the realization of income subject to tax or for the maintenance of the income-generating source.[25]

Thus, and in summary, autonomous taxes whose charges the Claimant seeks to have withdrawn from its taxable income may be viewed as a sort of consensual anti-abuse norm, in which the legislator proposes to the taxpayer one of three alternatives, namely:

a) not to deduct the expense;

b) to deduct but pay autonomous taxation, dispensing itself, both itself and the Tax Administration, from discussing the question of the business purpose of the expense;

c) to prove the complete business purpose of the expense, and deduct it integrally, not bearing autonomous taxation.

The Claimant contests this framing, even selecting it as the decisive foundation of the decision it criticizes, which, evidently, is not the case.

Notwithstanding, it will always be said that, also in this part, one does not discern that the Claimant's assertion is properly substantiated, according to which it will not be possible for the taxpayer not to deduct to its taxable income an expense which, being deductible, would be subject to autonomous taxation.

Thus, first and foremost, it should be borne in mind that accounting is not a closed and mechanically/automatically applied normative system, quite the opposite, always containing a discretionary margin of the respective subject, based on ineliminable evaluative judgments of various kinds (technical, legal, economic, management), explaining itself, moreover, in such manner the normalizing vocation of its regulation. Indeed, accounting norms may establish "(…) a true discretion in the Kelsian sense, i.e., an intentional indeterminacy, as happens for example when the accounting norm establishes several alternative methods for the valuation of inventories (…)"[26]

Thus, it does not appear correct the understanding that it will be forbidden (that it will be prohibited or unlawful) not to deduct to taxable income an expense that, being such, would be subject to autonomous taxation. No normative provision is found, nor does the Claimant suggest one, from which such derives.

On the other hand, it has been recurrently recognized, at the case law level, a space of "autonomy and freedom of management of the taxpayer,"[27] in which the intrusion of the PTA will be inadmissible, and where the "judgment on the opportunity and convenience of expenses," which "is exclusive to the businessman," will be included. And if it is true that this consideration has been directed at classification of expenses as necessary, by identity, if not majority of reason, one should understand as encompassing, precisely, the judgment of unnecessariness thereof.

That is, if the businessman, in exercising the "judgment on the opportunity and convenience of expenses," deems them as not necessary for the maintenance of the income-generating source, such cannot, with all due respect, be disputed by the PTA, if for no other reason than by lack of the general prerequisite (of the process but applicable to the procedure) of lack of legal standing to sue.[28]

One is not here asserting, evidently, contrary to how interpreted by the Claimant (page 15 of arguments), that autonomous taxes are optional. Rather, what will be (in a certain sense, at least) is the classification or not of a certain charge as deductible, in that it presupposes its necessity for the maintenance of the income-generating source, and such judgment is the responsibility of the person subject to taxation. Recall – once more – that here, as in the decision criticized by the Claimant, only autonomous taxation of deductible expenses is considered, so that it is not understood what relevance the cases to which the norms of Nos. 1, 2 and 8[29] of the 2010 CIT Code, cited for such purpose by the Claimant, have.

It is not, equally, a matter of suggesting that "expenses" may be "omitted," as the Claimant indicates in the same passage. Indeed, the accounting for a certain charge as non-deductible implies, precisely, its relevance in the accounting, which is, precisely, the opposite of its omission! Moreover, it could not be otherwise, considering that tax norms should be applied within the principle of formal connection.[30]

The recognition of this presumptive nature of autonomous taxes at issue in this case, in the terms above suggested, will be, beyond everything else, a safeguard of their constitutionality, in that the possibility of their full deduction by the taxpayer will be guaranteed, as well as their non-deduction, depending on which side the presumption underlying them is, concretely and in each case, rebutted.

By way of conclusion, faced with all that has been being said, and in favor of conceptual rigor, it will also be said that the tendency is toward the understanding that autonomous taxes, as they now exist, may be configured as a "hybrid" tax,[31] affecting the income of natural and corporate persons, and not consumption or expense, as they will not present the principal characteristics of such form of taxation. Taking into account that they also do not affect property, and since the Constitution of the Portuguese Republic does not provide for other types of taxation, the legislator only had two solutions: taxation under Personal Income Tax, in category A, in the person of the direct beneficiaries (which it already does in some cases) or under CIT (and, by extension, in category B of Personal Income Tax). In the latter case, the legislator could act at two levels (separately or simultaneously): not accepting the full deductibility of some expenses or partially and/or taxing them autonomously. Faced with the historical finding of a high number of persons subject to CIT with tax losses, the option for the generalization of autonomous taxes ended up being imposed.

Also here, once more, no contradiction is created, contrary to how interpreted by the Claimant. The circumstance that the legislator could opt for non-deductibility or partial deductibility of expenses which, instead, it decided to subject to autonomous taxation, not only does not contradict, as reinforces,[33] what has been being said. The Claimant's confusion may reside, perhaps, in the circumstance that it appears to her that above there was suggested the concealment of expenses subject to autonomous taxation in question in this case, which, as was seen, is not the case. Thus, the possibility, recognized to the legislator of limiting or excluding the deductibility of expenses in question, will not collide, in any manner, with the autonomy of the businessman in classifying as indispensable – or not – the expenses in which such person incurs.[34] Simply, in the latter case, the faculty in question will be inoperative – since, indispensable or not, the expense will not be deductible – and in the first, will only have part of its normal effect – if classify the expense as indispensable such person will deduct it partially (should such classification not be validly disputed by the PTA, evidently), while if such person does not classify it as such, such person will not deduct it at all.

Considering, then, that autonomous taxes that affect deductible charges under CIT integrate the regime of, and are due at title of, such tax, and as such are encompassed by the provision of subparagraph a) of No. 1 of Article 45 of the CITC, the expenses with payment of such autonomous taxes will not constitute deductible charges for purposes of determining taxable income, and should, in consequence, the present arbitral action be rejected.

C. DECISION

For which reasons this Arbitral Tribunal decides:

a) To declare the request for arbitral pronouncement completely rejected and, in consequence, to maintain the tax act impugned;

b) To condemn the Claimant in the costs of the process, in the amount of €2,448.00, taking into account amounts already paid.

D. Value of the Case

The value of the case is fixed at €69,396.92, pursuant to Article 97-A, No. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs a) and b) of No. 1 of Article 29 of the LRTA and No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Processes.

E. Costs

The arbitration fee is fixed at €2,448.00, pursuant to Table I of the Regulation of Costs of Tax Arbitration Processes, to be paid by the Claimant, since the request was wholly rejected, pursuant to Articles 12, No. 2, and 22, No. 4, both of the LRTA, and Article 4, No. 4, of the cited Regulation.

Notification ordered.

Lisbon

11 July 2014

The Presiding Arbitrator

(José Pedro Carvalho - Reporting Arbitrator)

The Arbitrator Member

(Ricardo Jorge Rodrigues Pereira)

The Arbitrator Member

(Júlio Tormenta)

[1] In this sense, see, for example, the Superior Administrative Court Judgment of 16-11-2011, rendered in case 0723/11, and available at www.dgsi.pt, in whose summary one can read: "The judicial challenge of rejection of an administrative claim has as its immediate object the decision on the claim and as its mediate object the defects attributed to the assessment act."

[2] (See Article 2/1/a)) "tax assessment acts, self-assessment acts,..."

[3] Arthur Kaufman, "Philosophy of Law," 3rd Edition, Calouste Gulbenkian Foundation, p. 44.

[4] "It is precisely in pedantically exact arguments, thought out with an extreme degree of rigor and precision, that we frequently have the impression that something, in some way, does not make sense."; idem, p. 89.

[5] Which is equally accepted by the Claimant, which demonstrates, in fact, that the "CIT" itself, in the sense defined by it, could be a deductible charge, citing the Swiss example, after asserting, in a passage already partially transcribed, that "according the autonomous taxes for purposes of the aforementioned subparagraph a) of No. 1 of Article 45 of the CITC the same treatment given therein to CIT and municipal surcharge is, at most, a purely legislative policy choice, as opposed to any natural consequence of the logic or purpose associated with autonomous taxes here at issue." It is added that the failure to "accord to autonomous taxes for purposes of the aforementioned subparagraph a) of No. 1 of Article 45 of the CITC the same treatment given therein to" VAT or corporate income tax will also be "a purely legislative policy choice, as opposed to any natural consequence of the logic or purpose associated with" CIT!

[6] Arthur Kaufman, op.cit., p. 186.

[7] Available at http://www.tribunalconstitucional.pt/tc/acordaos/20120617.html.

[8] Words of the Claimant (page 19 of its arguments).

[9] See, for all, the recent Judgment of 26/02/2014, rendered in case 01936/13, available at www.dgsi.pt.

[10] "There is no similarity whatsoever between confidential/undocumented expenses and the expenses at issue here" (Article 224 of the Initial Request).

[11] The Claimant contests this understanding (pages 9 et seq. of its arguments). Not integrating this aspect into the ratio decidendi of the present judgment, but an additional topic of reflection, it will always be said that the Claimant glosses over some fundamental aspects of the regime of, at least, some liberatory rates, such as the autonomization of the income subject to them, and corresponding rates, and the instantaneity of the respective tax fact. On the other hand, the regime of autonomous taxation of bonuses under Personal Income Tax (Article 72/2 of the 2010 Personal Income Tax Code), which presupposes an income and falls on its holder, appears undeniably close to that of liberatory rates. Which, if for nothing else, highlights the vain glory of fabricating a unitary concept of autonomous taxes, by it, to the utmost, stubbornly clinging.

[12] In this respect, see Soares Martinez, "Tax Law," 7th Edition, Almedina, 1993, pp. 191 et seq.

[13] This aspect is particularly evident under Personal Income Tax, where autonomous taxes provided for in Article 73 of the respective Code only apply to "persons subject to taxation who have or should have organized accounting, in the context of the exercise of business and professional activities." And even among these, "Excluded are (...) persons subject to taxation to whom the simplified regime for determining taxable profit provided for in Articles 28 and 31 applies." (No. 8 of Article 73).

[14] It would be difficult to understand that in the VAT Code, or in a corporate income tax code, or even in a statute regulating an autonomous tax, it would be established that certain expenses would only be subject to tax if deductible under CIT...

[15] And not decisive, as the Claimant seeks (pages 14 et seq. of its arguments).

[16] P. 4 of the Claimant's Arguments.

[17] The considerations below will equally apply, without any need for adaptation, to Article 3 of the CITC, referred to by the Claimant, which is merely a concretization of Article 1.

[18] Hence the reference to CIT in the strict sense/broad sense, reflecting such duality.

[19] Today, and after the most recent amendments to the legal regime in question, such person will not be affected or will be little affected since non-deductible charges will not, as a rule, be of significant amount.

[20] The Claimant itself recognizes anti-abuse purposes to some types of autonomous taxation, other than the one at issue in this case, such as that affecting profits distributed to entities exempt from CIT, as well as payments to entities residing in low-tax jurisdictions.

[21] Being thus incomprehensible the assertion that "whence also, in the idea of an arbitral decision, everything must have to do with the CIT of the person bearing autonomous taxes (and not with Personal Income Tax or, more broadly, with taxation of another person)." (p. 18 of the Claimant's arguments).

[22] Which, once more, adds to all the others that precede, not being, as such, the foundation of what was decided, in the sense sought by the Claimant.

[23] The Claimant contests this understanding, asserting, in sum (pages 16 to 19 of its arguments), that the part referred to as "personal" will, from the perspective of the person subject to CIT, still be business-related, citing the example of the use of a vehicle for private purposes by an employee, as being, still, such employee's remuneration, and, as such, necessary for business purposes. With all due respect, it is understood that such judgment contains a fallacy. Indeed, if it is undue remuneration (not contractually agreed) with the user of the vehicle, the expense is objectively unnecessary from the point of view of business purposes. Already if there is a contractual bond of the person subject to CIT to remunerate in the manner described the said user, we will be before an agreement subsumable to the provision of Article 2/3/b)/9 of the Personal Income Tax Code, with autonomous taxation being disallowed, pursuant to No. 6 of Article 88 of the CITC.

As for per diem, a situation equally alluded to by the Claimant, the excess will not be merely remuneration. If it were, for that matter, the person subject to CIT would assign such excess as such (that is, as remuneration), and would proceed with its accounting in that manner, disallowing autonomous taxation. The difficulty is, precisely, in the situation of the person subject to CIT accounting as per diem what is not. And, while per diem (which is what is subject to autonomous taxation), the expense, to the extent it is "objectively excessive given the increased costs borne by the employee in being away on company business," the expense is objectively unnecessary, since its reason for being does not obtain (to compensate the employee for increased costs incurred in company business).

One maintains, thus, for not seeing reasons to revise, the understanding that these autonomous taxes contain specific CIT motivations, linked to having presumably underlying them a partial business purpose.

[24] The Claimant points out that "it is absurd to equate expenses as those here at issue with expenses benefiting offshore corporations." Obviously, whether such comparison is absurd or not depends directly on what is being compared. What is at issue here is the legislative technique employed. And obviously – and the Claimant itself recognizes it – that the discretion of the legislative process licenses the legislator to apply the same mechanism that it deemed appropriate for expenses in favor of offshore corporations to other expenses, in particular those at issue here. That is, and to be clear: one does not discern, nor does the Claimant point out, reasons, from a legal point of view, that would prevent the legislative technique used in the treatment of both expenses from being the same.

[25] In such case, moreover, one should understand that the amount assessed as autonomous taxation should be annulled, and any amount paid reimbursed/compensated, thus affirming also by this means the patent intertwining of autonomous taxes with the CIT regime that they integrate.

[26] See Nina Aguiar, "Tax Law and Discretionary Accounting Judgments" in The New Accounting Framework and Judgments of Value: a Critical and Multidisciplinary Perspective, Almedina, June 2013, p.302

[27] See, for example, Superior Administrative Court Judgment of 30-11-2011, rendered in case 0107/11.

[28] Note that we are here speaking of documented expenses. Undocumented ones, by their very nature, whose analysis escapes the scope of the present decision, will be justifying of distinct treatment.

[29] All the more that it appears to be the Claimant's understanding that "it is absurd to equate expenses as those here at issue with expenses benefiting offshore corporations."

[30] Under this principle, tax norms do not replace accounting norms nor disconnect the calculation of taxable profit from accounting profit, although they lead to a different result. Thus, even if a charge is not tax-deductible, if such charge has accounting relevance, it must be accounted for in accordance with the accounting normative system in force in the jurisdiction under analysis. Now, in Portuguese tax law in terms of CIT, in Article 17 No. 3 there is a reference to "applicable accounting regulations" and, in No. 1 of the same norm, a rule of formal connection between accounting and tax norms. Indeed, the Portuguese formula of the principle of formal connection is very close to that which exists in Spanish and Italian law.

[31] Integrating, that dual-nature system, already alluded to above.

[32] See p. 22 of its arguments.

[33] Demonstrating that they are alternative means of pursuing the same ends.

[34] Whence it follows, as was seen, that, if, in exercise of such autonomy, the businessman classifies as not indispensable certain expenses which, if they were, would be subject to the autonomous taxation at issue in this arbitral process, such taxation will not take place.